Walgreens 2014 Annual Report Download - page 20

between Walgreens and Alliance Boots; and agreements and arrangements pursuant to which we and Alliance
Boots together have the right, but not the obligation, to purchase a minority equity position in
AmerisourceBergen and gain associated representation on AmerisourceBergen’s board of directors in certain
circumstances. AmerisourceBergen began to distribute all branded pharmaceutical products that we historically
sourced from distributors and suppliers, effective September 1, 2013. In the second quarter of fiscal 2014,
AmerisourceBergen began distributing generic pharmaceutical products that we previously self-distributed. The
levels of generic pharmaceuticals distributed have increased throughout the fiscal year and AmerisourceBergen
distributed substantially all of these pharmaceuticals for the Company as of August 31, 2014.
Our business may be adversely affected by any operational, financial or regulatory difficulties that
AmerisourceBergen experiences. If AmerisourceBergen’s operations are seriously disrupted for any reason,
whether a natural disaster, labor disruption, regulatory action or otherwise, it could adversely affect our business
and our sales and profitability. Our distribution agreement with AmerisourceBergen is subject to early
termination in certain circumstances, and, upon the expiration or termination of the agreement, there can be no
assurance that we or AmerisourceBergen will be willing to renew the agreement or enter into a new agreement,
on terms favorable to us or at all. We believe that alternative sources of supply for most generic and brand-name
pharmaceuticals are readily available, except to the extent that brand-name drugs are available to the market
exclusively through the manufacturer. We believe we could obtain and qualify alternative sources, including
through resuming self-distribution for many products, for substantially all of the prescription drugs we sell on an
acceptable basis, and accordingly that the impact of any disruption would be temporary. However, there can be
no assurance we would be able to engage alternative supply sources or implement self-distribution processes on a
timely basis or on terms favorable to us, or effectively manage these transitions, any of which could adversely
affect our business, financial condition and results of operations.
The anticipated strategic and financial benefits of our relationship with AmerisourceBergen may not be
realized.
Walgreens entered into the arrangement with AmerisourceBergen and Alliance Boots with the expectation that the
transactions contemplated thereby would result in various benefits including, among other things, procurement cost
savings and operating efficiencies, innovation and sharing of best practices. The processes and initiatives needed to
achieve these potential benefits are complex, costly and time-consuming. Many of the anticipated synergies and
expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Achieving the
anticipated benefits from the arrangement is subject to a number of significant challenges and uncertainties, including,
whether unique corporate cultures of separate organizations will work collaboratively in an efficient and effective
manner, the possibility of faulty assumptions underlying expectations regarding potential synergies, unforeseen
expenses or delays, and competitive factors in the marketplace. In addition, we and Alliance Boots have the right, but
not the obligation, under the transactions contemplated by the Framework Agreement dated as of March 18, 2013 by
and among the Company, Alliance Boots and AmerisourceBergen (the Framework Agreement) to invest in the equity
of AmerisourceBergen. There can be no assurance that we or Alliance Boots will complete any specific level of such
potential equity investments in AmerisourceBergen, or that if completed, that such investments will ultimately be
profitable. If such investments are completed and the price of AmerisourceBergen common stock subsequently
declines substantially, we could experience a loss on or impairment of such investment, which could adversely affect
our financial condition and results of operations. We could also encounter unforeseen costs, circumstances or issues
existing or arising with respect to the transactions and collaboration we anticipate resulting from the Framework
Agreement. Many of these potential circumstances are outside of our control and any of them could result in increased
costs, decreased revenue, decreased synergies and the diversion of management time and attention. If we are unable to
achieve our objectives within the anticipated time frame, or at all, the expected benefits may not be realized fully or at
all, or may take longer to realize than expected, which could have a material adverse impact on our business, financial
condition and results of operations and the price of our common stock.
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